Growth in buy-to-let faster than market as whole, says CML

14 Feb 07

330,000 buy-to-let mortgages, worth a total of £38.4 billion, were taken out in 2006, according to figures released today by the Council of Mortgage Lenders. This represents 11% of all new lending, and is a 48% increase in volume and 57% increase in value over 2005.

On a half-yearly basis, buy-to-let lending of £21 billion (178,000 loans) took place in the second half of 2006, the highest figures since the survey started in 1998.

The total number of buy-to-let mortgages outstanding now stands at around 850,000, worth a total of £94.8 billion. Since the end of 2005, when the corresponding figures stood at 702,000 and £73.4 billion, the number of mortgages has risen by 21% and their value by 29%. By value, buy-to-let lending represented 9% of all mortgage balances at the end of 2006, up from 8% in 2005.

In terms of arrears, the proportion of buy-to-let mortgages 3 months or more in arrears continued to fall from 0.64% at the end of the first half of 2006 to 0.59% at the end of the second half of the year. This is lower than the 0.89% of loans in arrears in the wider mortgage market.

The CML now splits out buy-to-let arrears cases into those where a court-appointed receiver of rent has been appointed, and those where there is no receiver of rent. Where a receiver of rent exists (who takes receipt of rental income relating to properties where the mortgage is in arrears, and pays it to the lender), these loans are now quantified separately.

Lenders regard the receiver of rent option as an alternative to repossession in the buy-to-let market. The number of buy-to-let properties taken into possession during 2006 was 1,142 (0.14% of all buy-to-let mortgages), compared with 0.15% in the wider market. The number of cases where a receiver of rent was appointed in 2006 was 494 (0.06%). Taken together, this represents 0.2% of all buy-to-let loans.

Commenting on the figures, CML Director General Michael Coogan said:

"The buy-to-let market has performed even more strongly than the wider market over the course of 2006. With evidence from other sources of strong tenant demand, rising rents and falling void periods, buy-to-let looks set to continue to remain popular and successful."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.6 million mortgages in the UK, with loans worth over £1 trillion.

2. Arrears levels are lower in the buy-to-let market than for the market as a whole, yet the combination of possessions and receiver-of-rent cases is higher than the proportion of possessions in the wider market. This reflects the fact that lenders are more likely to enforce their security more quickly on buy-to-let loans than on owner-occupied loans. This is because buy-to-let is a more commercial market. Landlords normally let out their properties on six-month or annual tenancies, so the important considerations of longer-term forbearance to try to keep people in their homes that apply to home-owners are less relevant in the buy-to-let sector.

3. The latest buy-to-let figures are attached which now include buy-to-let mortgage arrears and possessions.